Chinese luxury EV maker Xpeng saw a slight increase in deliveries for July, reaching 11,145 units, driven in part by higher sales of its premium X9 multi-purpose vehicle. However, Xpeng’s performance lagged behind rival Li Auto, which delivered 51,000 vehicles in July, an increase of 49% compared to the previous year. Xpeng’s stock has suffered a sharp decline of 80% from early 2021 levels, mainly due to concerns about the Chinese economy and trade barriers for Chinese EV imports. This underperformance has also been reflected in comparison to the S&P 500 index.
Xpeng’s uneven growth rates and loss of ground to Li Auto have hindered its stock performance, with returns fluctuating significantly over the past few years. Despite the challenges faced by individual stocks in beating the S&P 500, the Trefis High Quality Portfolio, consisting of 30 stocks, has consistently outperformed the index. With uncertainties in the macroeconomic environment, including high oil prices and elevated interest rates, investors are questioning whether Xpeng will continue to underperform or see a recovery in the near future.
Despite concerns about the economy and weaknesses in the global EV market, the Chinese EV industry still shows promise. China introduced new incentives for consumers to replace gasoline cars with electric vehicles, which could benefit Xpeng as it aims to expand into more mass-market models. The company plans to launch a new sub-brand, Mona, with vehicles priced competitively to target larger volumes in the mass market. Xpeng’s financial metrics have improved recently, with higher average revenue per vehicle and gross margins, partially due to sales of the higher-priced X9 model and a patent licensing deal with Volkswagen.
Xpeng stock currently trades at a reasonable valuation of approximately 1.25x forward revenues, but there are risks involved due to the mixed Chinese economy and trade barriers in key markets like the U.S. and Europe. The company will need to navigate these challenges to sustain its growth momentum and compete effectively against rivals like Nio and Li Auto. For a detailed comparison of Xpeng stock with its competitors, investors can refer to the Trefis analysis of Nio, Xpeng, and Li Auto.
Overall, while Xpeng faces challenges in the competitive Chinese EV market and external economic factors, the company’s strategic initiatives to target mass-market models and expand its product range could drive future growth. Investors will be closely watching Xpeng’s performance and market positioning in the coming months to assess its potential for recovery and long-term success.
